Businesses, especially manufacturing firms, have largely been shut down since April after the country imposed movement restrictions to curb the spread of Coronavirus infections.
The economy of Africa’s largest oil producer has also been battered by a drop in crude prices this year.
This has hit hiring and the creation of new pension accounts, which is mandatory for all employers in Africa’s most populous nation.
New retirement savings accounts grew 85% less in April compared to the same period a year earlier, according to data from the West African nation’s pension body, an indication of a slowdown in the number of new jobs. Over 40,600 new pension accounts were created in February but that number dropped to around 30,000 in March and virtually disappeared in April. No data is as yet available for May. The number represents those taking up jobs for the first time or opening pension accounts for the first time.
Still, total pension fund assets under management in Nigeria was steady at 10.6 trillion Naira ($27.3 billion) in April, almost the same level as in February.
“If companies aren’t hiring we can’t sign people for pension plans,” said Wale Okunriboye, head of investment research at Sigma Pensions Ltd. in Lagos.
“Businesses will go through a difficult time and try to manage costs, as a result, we expect unemployment numbers to increase.”
Nigeria’s official unemployment rate was 23% at the end of 2018 and is expected to rise to 34% by the year’s end if urgent steps are not taken, according to a report published this month by a government pandemic committee led by Vice President Yemi Osibanjo.
Fund managers are worried that contributors will start requesting money from their retirement accounts if they remain unemployed for at least four months, Okunriboye said.
Other pressure on pension assets could come from a reduction and non-payment of salaries by some employers, including Nigeria’s 36 state governments.
Earnings from crude sales will plunge 80% to 1.1 trillion Naira this year, the nation’s budget office said in May, leaving less money for states to pay wages and fund workers’ pensions.
Nigerian fund managers portfolio’s have also been severely impacted by the dramatic oil market moves.
“Most of the underlying assets pension fund managers invest in are tied to the performance of crude oil,” said Damilola Olupona, an analyst at the Lagos-based Asset Resource Management Pensions.
SOURCE :BUSINESS DAY
